ACCA Advanced Taxation (ATX) Practice Exam

When considering an exemption for overseas profits, what choice does each UK company in a group have?

1. Must follow the majority decision of the group

2. Must make the election if one company does

3. Each company can individually decide whether to make the election

4. Group consensus is required for any related tax decisions

The correct answer is: Each company can individually decide whether to make the election

Each UK company in a group retains the discretion to individually decide whether to make the election for the exemption on overseas profits. This means that one company can choose to elect for the exemption while another company within the same group can decide not to, depending on their specific circumstances and tax planning strategies. This approach allows flexibility for individual companies to consider their operational needs and tax situations rather than being bound by a collective group decision. This individual choice is significant in tax planning, as it enables companies to optimize their tax positions based on their unique overseas income, making sure that they can benefit from the exemption if it aligns with their financial strategies. In contrast, other options suggesting a collective decision-making process among the group undermine this individualized approach, which is a fundamental aspect of how tax elections operate in groups of companies in the UK.